So You Want To Start Flipping Houses?
Flipping Houses In Fort Lauderdale … Or Buying And Selling Fort Lauderdale Investment Property And Foreclosures
It looks like we are beginning to emerge from the foreclosure and credit crisis. How do I know this? Because real estate investors are starting to come back to the Fort Lauderdale real estate market looking for deals. People I have not heard from in 2 years are starting to call and email asking if I knew of any deals out there. I know about TONS of deals out there.
Inevitably there will be new investors entering the market who are looking to get started in real estate investing by flipping houses. Whether these new investors are going to try to rehab the property, sell it to a buyer they already have, or hold the property long term and decide to be a landlord, this may be the best time in history to dive in and get started.
Almost every new investor I have worked with has many questions when it comes to doing their first real estate deal. It is quite natural to be a bit nervous when you do something for the first time, but when you are working with people who experts in the field, it makes the process much smoother. I am going to answer ten of the most frequent questions we are asked by new Fort Lauderdale real estate investors when looking to buy Fort Lauderdale investment property.
Where do I find the properties?
Most new investors in the information age get new property alerts by email from wholesalers in their area. This is by far the easiest and most used method.
There are several advantages to getting your properties this way. It is immediate. You can get property alerts the moment they are happen. You can even get the on the go if you have a capable cell phone. An expert has usually looked over the property and valuated it. Lastly, you will usually get all the information you need about a specific deal without ever leaving your home.
How do I know a good deal?
A good deal to one person could mean something totally different to another. You have to know what you want you want to accomplish and then see if that deal does it for you.
For instance, if I were going to rehab a property I would need the deal to be priced in such a way that I have spread for my purchase, repairs, holding, selling costs, and profit. If the deal fits those criteria then it would be a good deal.
If I were going to hold a property as a landlord, I would look into how much cash flow the property generated and make my decision based upon that if the deal was a good one for me.
What do you look for when previewing a home?
Again, based upon what you what want to do with the property, the answers to this question would be different. However, unless you are a developer looking to knock down the property, most investors look at the basic building blocks of the property. There are usually 5 things that most investors focus on.
Roof: First thing we want to know is does it leak. If it is watertight then we are in business. Even if it is not watertight, that could mean a great big discount and ever larger profit margins if you are going to rehab. If we are going to hold it we want to know how old the roof is so we know when we will have to replace it.
Foundation: Are there any large cracks in the walls or near the base of the walls? You need to look on the interior and exterior of the building for these. Is the floor level and are there any large cracks in the floor? We want to know that the home is stable and not going to fall in a sinkhole anytime soon.
Electrical: Is the home on fuses or circuit breakers? How many amps of service does the panel accommodate? There are some electrical problems that are fire hazards and will need to upgraded. You might also want to change the service if it is not on par with comparables.
Plumbing: Is the home on a septic tank or hooked into the sewer system? Are the pipes cast iron and rusted through? Any evidence of leaks or backups? Most plumbing problems are hard to spot as they are in the walls or buried so it is a good idea to flush the toilets and run the faucets and baths.
Obvious Defects/Problems: I am referring to things such as fires, major water damage, or extensive termite damage. Believe it or not, these types of properties sell very quickly because they are absolute goldmines. I usually do not recommend these for beginning investors, but for someone with knowledge and experience, they can make an absolute killing with these properties.
How long do I have to decide if I want the property or not?
Not long! Wholesalers usually only send out properties they have looked over and know that it will be a deal someone wants, otherwise, they would not even waste their time. Once a property is emailed, responses come back within 5 minutes or so.
Sometimes, if it matches an investors exact buying criteria, they have been known buy the property on the spot. The point is, know what you want up front and if the deal matches what you are looking for, BUY!
If I want the property, what is the process to get started?
The first thing you do is let your wholesaler know you want to buy. They will instruct you on exactly what you need to do to lock up the deal. The usual process will be to meet and sign a contract and deliver a deposit. Sometimes you will be able to do it by fax and just wire the deposit as well.
Whatever the process, be aware that until you have a valid, signed contract and recognized deposit, the property is still for sale and can be purchased by anyone.
Do you work with a real estate agent?
Most wholesalers I know do not work with real estate agents. That does not mean that real estate agents are not involved in the deal, many of the buyers I work with are also real estate agents buying for their own investment purposes.
If you are real estate agent looking to earn a commission and not looking to be a principle, be aware that you will likely be looking for a long time. Most wholesalers do not need the services of a real estate agent to either find the properties they wholesale, nor to sell the properties that are advertising.
If a real estate agent tells you it is illegal to buy or sell a house without using the services of a licensed real estate agent, you can tell them to call me and we can have a good laugh.
What if I do not have cash to cover the whole purchase?
As long as you know that you will need to use some of your own money, financing for investor purchases is still available. The days of no money down buying a home are over, you have to have some “skin in the game”. That means you will have to put in some of your own cash.
As an investor, you will most likely be using a hard money lender because not only can they close quickly, they also will lend on properties that need repairs where traditional lenders may balk. Be prepared to pay at least 20% of the purchase price out of your own funds. As you develop a relationship with your hard money lender, the out of pocket amount often changes.
How long does it take to close?
Most investor properties close very quickly. Be prepared to close on the property in one to five days. Often, the title work and all closing paperwork is prepared in advance and waiting on the buyer.
The only holdup after contract is signed is likely on the buyer’s side. The only reason a buyer would need any extra time would be so that their hard money lender could get their own paperwork in order.
Can I put a Section 8 renter in this home?
Unless an HOA or community association mandates in their bylaws that a property cannot be rented at all, you can rent to a Section 8 participant.
If you decide to rent Section 8, the property will need to pass an inspection. The inspection is based on standard FHA guidelines. You can find a checklist for Section 8 here. http://www.orangecountyfl.net/cms/business/section8/propertyreadinesscheck.htm
What kind of income can I realize from rents / Section 8?
Usually the wholesaler you are working with can give you some of this basic information. There are also a number of websites you can use to do some research from home of you are not familiar with the specific area.
The best way to find out what things are renting for is to drive to the area and call on some For Rent signs. Ask them how many beds and baths and how much per month. Do this until you have about 3 or 4 prices that match your property type and you will have your answer.
For Section 8, the process is even more straightforward. The amounts paid out are set by number of bedrooms and baths, and then published. You can contact the housing authority in your area for these rental rates.
If you are a new investor looking for your first deal, or an investor looking to do more deals, we hope that you have learned something from this article. The main thing to remember is that when you work with a wholesaler, you have an invaluable resource with a wealth of investing knowledge. If you are serious about buying, do not be afraid to ask questions, most of us like helping out those just getting started.
If I can leave you with one piece of advice, you must ACT. You can ask every question in the world, inspect the property from top to bottom, have all the money in the world, but if you are not ready to get into the game, don’t waste your time or ours.
Flipping houses can be very profitable but make sure you know what your doing and you will find that investing in Fort Lauderdale foreclosures is a lucrative endeavor.
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